Xenia Hotels Q2 FFO Up 9.6%

Xenia Hotels & Resorts (XHR -0.31%), a real estate investment trust focused on luxury and upper-upscale hotels in major U.S. markets, reported its Q2 2025 earnings on August 1, 2025. The headline news from the release was a substantial beat on both earnings (non-GAAP EPS) and revenue (GAAP), as adjusted funds from operations (FFO) per diluted share (non-GAAP) reached $0.57, compared to an estimated $0.30. Revenue (GAAP) landed at $287.6 million, outpacing the consensus estimate by over $14 million. Performance was bolstered by healthy demand in group and catering segments, as well as effective expense management that drove profit growth. Management offered an overall positive assessment of the quarter, reflected in a raised full-year outlook.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Focus

Xenia Hotels & Resorts (XHR -0.31%) specializes in owning luxury and upper-upscale hotels in the largest U.S. cities and top leisure destinations. As a real estate investment trust, it owns properties but does not directly operate them, instead partnering with established hotel brands and management companies. The company targets properties with strong brand affiliations and favorable locations to drive revenue and asset value.

In recent years, the company has concentrated on fine-tuning its portfolio to enhance quality and profitability. This includes selling non-core assets like Fairmont Dallas, pursuing selective hotel investments, and maintaining disciplined capital spending. Xenia’s approach relies on three pillars: investment strategy (focusing on high-growth markets), active asset management, and maintaining a strong, flexible capital structure. Key to success is driving higher occupancy and room rates, while managing costs and deploying capital efficiently for renovations or acquisitions.

Quarter Highlights and Performance Drivers

The three months ended June 30, 2025, saw notable improvement in operations and financial outcomes. Revenue (GAAP) exceeded analyst expectations, with the $287.6 million in GAAP revenue, representing a 5.4% gain over Q2 2024. Adjusted FFO per diluted share reached $0.57. This beat the analyst consensus by 88.2% (non-GAAP).

Net income per share available to common stockholders (basic and diluted) was $0.56, up from $0.15 for Q2 2024. Adjusted EBITDAre, which approximates cash profit by excluding interest, taxes, depreciation, and amortization, grew 16.3% to $79.5 million. These increases reflected widespread operational advances and margin improvement, especially in group bookings and catering.

Group and catering demand stood out as drivers for the period. Management pinpointed "outsized gains in highly-profitable catering revenues" and strong group business performance at several hotels. Food and beverage revenue within the same-property portfolio jumped 20.9%, significantly boosting overall profitability. The recently renovated Grand Hyatt Scottsdale Resort was a major highlight, driving a 4.0% increase in Same-Property revenue per available room (RevPAR) -- a key industry metric capturing average room revenue for all rooms, whether occupied or not. This property’s performance also led robust gains in the Phoenix market, with RevPAR up 60.9% at that site in Q1 2025.

The company reported sluggish results in select cities such as Dallas (Same-Property RevPAR down 12.7%), Portland (down 13.0%), and Houston (down 4.8%), with increased competition and weaker demand pressuring results regionally. However, most markets saw gains, including Orlando (up 6.6%), San Francisco (up 7.7%), and Pittsburgh (up 27.5%). Xenia invested $18.5 million in property upgrades, implementing guest room and infrastructure improvements across the portfolio. Some projects were postponed due to tariff-related cost uncertainty and a focus on minimizing operational disruption.

On the capital side, Xenia repurchased 2.95 million shares at an average price of $12.10, reflecting its ongoing approach to return capital to shareholders. Total liquidity stood at $673 million, with ample cash on hand and access to a $500 million credit revolver. The board declared a quarterly dividend of $0.14 per share, continuing the company’s practice of distributing a significant portion of income to shareholders as required by its status as a real estate investment trust.

Looking Ahead

Leadership raised guidance for 2025, signaling confidence following the quarter’s outperformance. The updated outlook includes a full-year Adjusted EBITDAre (non-GAAP) range of $249 million to $263 million, and Adjusted FFO guidance of $166 million to $180 million for the full year. This marks a $14 million increase at the low end for both Adjusted EBITDAre (non-GAAP) and Adjusted FFO (non-GAAP) versus prior guidance, with Adjusted FFO per diluted share is now expected in the range of $1.66 to $1.80 (non-GAAP) for the full year. Management’s comments noted that the outlook for the second half remains "unchanged," but group business is expected to be "particularly strong in the fourth quarter." Capital expenditure plans remain at $75 million to $85 million for the full year.

The company anticipates that trends in group demand will remain a key driver, while expecting leisure-related revenue to normalize and some regions to experience flat or modest growth. Risks outlined involve continued macroeconomic uncertainty, moderating leisure demand, and competitive challenges in specific cities. Moving forward, investors may want to watch for further progress in group business momentum, the impact of recently completed property upgrades, and the company’s approach to capital allocation in the face of ongoing market volatility.

XHR pays a regular quarterly dividend of $0.14 per share as declared.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.